New York Stock Market Declines Amid FOMC Caution... Will Fed Maintain Outlook for Three Rate Cuts This Year?

FOMC Ahead, Wait-and-See Sentiment
Base Interest Rate Freeze Confirmed... Dot Plot Revision Key

The three major indices of the U.S. New York stock market are showing a downward trend in the early trading session on the 20th (local time). Ahead of the Federal Open Market Committee (FOMC) meeting announcement scheduled for the afternoon, market caution and a wait-and-see stance are intensifying. In this FOMC, the Federal Reserve's (Fed) benchmark interest rate is expected to remain unchanged, while the market is focusing on whether the Fed will maintain its forecast of three rate cuts this year.

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As of 9:53 a.m. at the New York Stock Exchange (NYSE) on the day, the Dow Jones Industrial Average is trading at 39,086.35, down 0.06% from the previous close. The large-cap focused S&P 500 index is down 0.06% at 5,175.21, and the tech-heavy Nasdaq index is down 0.12% at 16,147.94.

The FOMC monetary policy meeting is scheduled for 2 p.m. Eastern Time on the same day. This is the second meeting of the year, and the benchmark interest rate, currently at 5.25?5.5%, is expected to remain unchanged. The key issue is whether the Fed will revise the dot plot, which shows interest rate projections. The dot plot represents the interest rate forecasts of all 19 members, including both voting and non-voting members of the FOMC.

Previously, at the December FOMC meeting last year, the Fed projected the median federal funds rate for this year to be 4.5?4.75%, anticipating three 0.25 percentage point rate cuts over the year. However, with inflation indicators such as the Consumer Price Index (CPI) and Producer Price Index (PPI) proving stickier than expected, some speculate that the Fed may reduce the number of rate cuts from three to two this year.

According to a Bloomberg survey, most economists expect the Fed to start cutting rates in June and implement three cuts this year. However, one-third of them believe the number of rate cuts will be limited to two or fewer. Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, stated that he is considering lowering his forecast for the number of rate cuts in 2024 from two to one.

The market is also paying close attention to the press conference by Fed Chair Jerome Powell following the FOMC statement release. It is expected that Powell's message will contain hints about the future path of interest rates.

Mark Zandi, Chief Economist at Moody's Analytics, said, "The Fed will make it clear that it is not ready to cut rates," adding, "More data is needed to be confident that inflation is returning to target levels." He further stated, "The Fed will reaffirm three rate cuts this year," suggesting that the first rate cut will occur in June.

Additionally, the Fed will update the Summary of Economic Projections (SEP), which is released quarterly and includes forecasts for GDP, inflation, and unemployment. In December last year, the Fed lowered its inflation forecast and raised its GDP growth forecast. There are expectations that the Fed will raise both inflation and GDP growth forecasts in this SEP.

Whether the Fed will officially discuss reducing the scale of quantitative tightening is also one of the key points to watch in this FOMC.

By individual stocks, Intel is up 0.89% following news that it will receive $8.5 billion in subsidies and $11 billion in loans from the U.S. government under the CHIPS and Science Act (CSA). Chipotle, a U.S.-based Mexican food chain, is soaring 6.45% on news of a 50-for-1 stock split, the largest in U.S. stock market history.

U.S. Treasury yields are moving sideways. The benchmark 10-year U.S. Treasury yield is around 4.29%, and the 2-year Treasury yield is hovering near 4.69%.

International oil prices are declining. West Texas Intermediate (WTI) crude oil is down $1.14 (1.38%) at $81.59 per barrel, and Brent crude is down $0.92 (1.06%) at $85.70 per barrel.